Differentiation Strategy

Posted by Steven Teo under Branding,
July 3, 2007

BusinessWeek: Just because there is no one selling a particular product or service doesn't mean it's automatically a good idea to try. Conversely, a competitively crowded industry shows that demand exists, as well as a viable market. The key to business success isn't finding an empty field, but defining your company narrowly—no matter how crowded a marketplace you're entering.

There are many ways you can differentiate your company, says Reid Carr, president of Red Door Interactive, a small Web development firm based in San Diego. "You can choose to sell to different people, such as small businesses; you can find new distribution channels; you can stratify the industry's price points by introducing a luxury class; or, you can redefine your selling proposition," he says, noting how Starbucks (SBUX) revolutionized the coffee shop by selling an experience rather than just a beverage.

However you choose to be different, you must be great at the basics and exceptional at your defining factor, Carr says. "The key here is to know who you are and who you are not." Another way to get a toehold in a mature market is to watch for change or stagnation in that industry and capitalize on it. "Even in highly competitive industries—perhaps even more so than in noncompetitive markets—there are external and internal market forces that will create change in the dynamics," says Eric Basu, president and CEO of technology firm Sentek Consulting in Mission Hills, Calif. "Successful companies and entrepreneurs aspiring to enter a competitive market will observe the winds of change and seize opportunities arising from changes. A successful entrepreneur will often have prepared for entry into the industry by securing capital, establishing connections, possibly occupying a sentry position, and otherwise laying the groundwork for opportunity."

Starting a Business in a Crowded Market [BusinessWeek]

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